So having an emergency fund is fine and good, but what if you find yourself dipping into it all the time? Before you can learn to live frugally or even responsibly you have to know what is coming in and what is going out. A parent at our son’s preschool was ranting to anyone who would listen which she does all the time, apparently they had been living way beyond their means for too long, and probably would have continued longer had the phone calls began. More recently I’ve heard people bragging at work that once they filed bankruptcy they could get any loan they wanted since the lender knew they couldn’t default for another seven years. Have we lost any sense of shame in our fiscal irresponsibilities?

flickr:hanneoria

The most important thing you can do for yourself is to create a budget. This is your base line assessment of your monetary flow. Remember to always pay yourself first, even though most experts recommend 10-15% of your income, anything is better than nothing. The rest is easy, just write down how much you need to pay for your housing, utilities, transportation, insurance, bills, and anything you regularly spend money on. This will often help you realize how much of your money is actually being wasted and on what. Although there are many ways to create a simple budget I found that budgeting on a fiscal year, more interesting, easier, and shows the most potential to build savings.
There are 52 weeks in a year, and if like a business you divide this weeks into periods of four week months, then you will have a thirteen month fiscal year. 52/4=13. Wait thirteen months in a year? That doesn’t seem right, why are there only twelve in a normal year. Let’s see, “Thirty days hath September, something else and November.” The best way for me to understand this was thinking back to my time in the service. We would get paid on the 1st and 15th of every month. Sometimes our paychecks between the 15th and the new month would seem excessively long. This was especially true when the 15th fell on a sunday or a holiday, where could be paid up to three days earlier on that friday. But the main reason is that not all months are equal in length. So looking at our elementary math earlier this means that somewhere in the year I’m missing out on a free months worth of pay. This must have been what that guy was talking about years ago in that financial class about making an extra mortgage payment every year.
Stick with me. Our new fiscal year will begin on April 1st. Lets say that that’s when my rent is due. So after paying my rent for April I budget saving a quarter of next months rent every week. Next month’s rent is not due until May 1st, but I will pay it on April 29th, four weeks or 1 fiscal month into my budget. June’s rent will be paid on the 27, July’s on the 24th and August’s on the 22nd. I’m already paying rent a week early. Eventually I will be so far ahead of my rent that it is essentially free money that I may have otherwise not noticed, and blown on wine or coffee, or god forbid fast food somewhere.